Rail’s last segment fraught with risk

Honolulu’s taxpayers can be forgiven if they’re still quite nervous about the “recovery” financial plan that in theory puts the city’s fiscally troubled rail project back on track.

Theories about costs and how to pay them have evolved over the years, so it’s hard to feel too confident about the assurances coming from the Honolulu Authority for Rapid Transportation (HART) on Tuesday that they’ve now settled on a winning formula.

For one thing, the Federal Transit Administration must approve the plan for financing the 20-mile elevated rail line, which now carries a pricetag of just over $9 billion. The months-long review is a hurdle to clear before any more federal subsidy dollars are released.

That bottom-line figure is to cover everything: the FTA-required contingency funds and financing charges as well as the straightforward construction expenditures. Encouragingly, the new HART executive director has telegraphed his resolve to keep the project to narrower cost boundaries.

“This is a $7 billion project because the rest of it is contingency,” said Andrew Robbins Tuesday. “So, that’s the mindset that I want our staff to have, that the project is $7 billion.”

That’s a good tone, but the project now must move along the difficult terrain of its City Center segment. In recent weeks, HART restarted its already stalled process for awarding the construction contract for that final 4.3 miles of guideway and eight stations.

The intent, said Robbins, is to explore potential for cost-saving “innovation” though public-private partnerships. The public has to hope the new HART managers and city administration officials will pursue such arrangements with greater vigor than past regimes have exhibited.

There remains a great deal of risk. The agency was able to submit this week’s final recovery plan because in late August the state Legislature came up with the new funding mechanism, an extension of Oahu’s general excise tax surcharge dedicated to rail and the addition of a new surcharge on the transient accommodations tax, assessed of tourists statewide.

The tourist tax addition enabled some front-loading of the bond payments, aimed at achieving savings on the financing charges. HART now estimates that this will save $450 million, far above state lawmakers’ projection of a $208.6 million markdown on interest payments.

But perhaps the biggest risk lies in the route itself, which cuts through dense urban zones with myriad engineering challenges — the difficulty of navigating through utility lines down Dillingham Boulevard only one of these. This is why the federal authorities are likely to insist that the contingency fund remain robust — and why spending it down significantly seems likely, regardless of good intentions.

Still, HART is making a serious effort to cut that risk, Robbins said, by getting much of the utility work done before reissuing the request for proposals to potential City Center segment contractors. Reducing the risk at the outset would be the rational strategy to ensure more competitive bidding from contractors.

And some of what could have been disastrous fiscal damage seemingly has been contained. Manufacturing flaws in the first rail cars delivered will be covered by Ansaldo Honolulu, a joint venture, officials said. HART also said that repairs of defective shims and pads along the first 11 miles of guideway track will be absorbed by that contractor, Kiewit Infrastructure West Co.

Still, even assuming federal approval of the revised plan, it will be tough meeting the target of opening the partial system, from Kapolei to Aloha Stadium, by the end of 2020. HART will need exacting oversight by the added layer of the state auditor, city officials and its own new management to achieve what ultimately must define success: a full-scale rapid transit system, from East Kapolei to Ala Moana.